Enhancing broadband penetration

Proshare

Wednesday, April 29, 2015 8:57 AM / FBN Capital Research 
 

Nigeria's deepening internet penetration is enhancing trade by spurring e-commerce transactions and improving the provision of banking services. The federal telecommunications ministry estimates that from 2012 through to Q3 2014, the e-commerce segment attracted US$200m in foreign direct investment. The latest data released by the Nigerian Communications Commission (NCC, the industry regulator) show that internet subscriptions grew by 31% y/y to 83.4 million in February 2015. Subscriptions were overwhelmingly on the global system for mobile communications (GSM) while code division multiple access (CDMA) accounted for less than 1% of total internet subscriptions in February.                                                               

MTN Nigeria emerged as the leader in terms of internet subscription, accounting for 47% of the total in February. Based on its recent quarterly update, data revenue rose by 17% y/y in Q1 2015 and now contributes 19.7% of the company’s total revenue.

The FGN’s medium-term goal is to increase broadband penetration to 30% at a minimum speed of 1.5mbps. Last year, it expanded to 8% from 6% recorded in 2013.

The recent issue of infrastructure company (InfraCo) licenses to two telecoms companies was a step forward. These licenses are expected to assist in deploying metropolitan optic fibre infrastructure and associated transmission equipment on an open access model. This would support facilitating local content development for the sector as well as delivering cost effective services to households and businesses.


 Last year the NCC’s auction of the 2.3GHz spectrum to Bitflux Communications boosted investors’ confidence. However, the commission seems to be having challenges in moving to the next phase, which is the auctioning of the 2.6GHz spectrum license. This auction has been suspended twice.

Through significant private-sector participation, the telecoms industry has expanded notably and now represents 8.4% of constant price GDP. Telecoms service providers rolled out 318,000 km of fibre optic cables across the country in 2014, compared with just 68,000 km in 2013.

However, the current macro headwinds have weakened consumption demand, which will have a negative impact on telecoms and other sectors too.

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